According to literature, the quality is determined by internal and external effectiveness of education (Magoula, 1999a) .

External effectiveness of schooling refers to the successful entry of graduates into either the next level of education or the labor market. The study of external efficiency is mainly focused on the study of the rates of return on education. It should be noted that the rates of return on education reflect in addition to the quality of the education provided, the demand for education as well.

Greece is a country characterized by a “high” demand for higher education (Magoula, 1999b) . According to the data from ELSTAT and the Greek Ministry of Education, Religious Affairs and Sports in 1961, there were 28,140 students’ applicants for higher education, while in 2022, there were 99,305 (see Table A1). So, during the above period, there was an increase in the demand for higher education in Greece by 352.9%.

In addition, it should be noted in comparison that there were more male students in the first period up to the beginning of the 1980s, while in the next period from 1980 until 2022, there were more female students (see IOBE, 2017: p. 58 ).

In the international literature, there are several ways of estimation of rates of return on education. The Elaborate Method, or Full Method, and the Method based on the Mincer equation are usually used. The choice of method depends to a significant extent on the data. The most common method is the method based on the Mincer equation (Patrinos, 2016) .

Based on the Mincer equation method, many studies have been conducted for Greece from the 1960s to today.

Specifically, the following are recorded:

1) According to Leibenstein’s (1967) study, the rate of return on higher education in Greece in 1962 amounted to 6%. It should be noted that the study was based on a very small sample from the Athens area, but it was the first study done in Greece.

2) According to a study conducted by Psacharopoulos in 1977 (Psacharopoulos, 1982) on a larger—than Leibenstein—sample of the urban population, the rate of return on higher education in Greece was 5.5%. In other words, he observed a downward trend in the larger sample.

3) In Magoula and Psacharopoulos’s (1999) study, using data from the ELSTAT Household Budget Survey, it was concluded that the rate of return on higher education in Greece amounted to 8.7%.

4) Subsequently, Prodromidis and Prodromidis (2008) also using data from the ELSTAT Household Budget Survey (HBS) concluded that the rate of return on higher education amounted to 9%. In other words, an increasing trend of the rates of return on higher education continued, as shown in Table 1.

This article investigates the trend of the rates of return on higher education in Greece for the period 1962-2022. For this purpose, data from the Household Budget Survey (HBS, ELSTAT) will be used.

Based on the data that we have from the https://www.statistics.gr/documents/20181/fae98df5-d44a-6a13-a681-75d24561fac4, we will apply the Mincer Method (Mincer, 1974) . The Mincer equation explains earnings as a function of schooling and labor market experience, giving a clear sense of average monetary returns of one additional year of schooling (Patrinos, 2016) .

Source: Magoula and Psacharopoulos (1999, Table 13) , Prodromidis and Prodromidis (2008, Table 5) .

According to the standard Mincer equation, income from work is equal to:

ln W = a + b S + c ( E X P ) + d ( E X P ) 2 + u (1)

Ιn Function (1), the dependent variable W (wages) which is the income from work is determined by the following independent variables: S (schooling) which equals years of education and (EXP) experience which corresponds to work experience. Work experience (EXP) is calculated as follows: EXP = AGE − S (total years of study) − 6 (age of enrolment in compulsory education).

Mincer equation can be used to estimate returns at different levels of schooling by converting the continuous year of schooling variables (S) into a series of dummies variables.

So, we extend the basic Mincer equation with the dummies variables S₂ and S₃, to estimate the rates of return to higher education.

ln W = a + b 2 S 2 + b 3 S 3 + c ( E X P ) + d ( E X P ) 2 + u (2)

where S₂ is equal to 1 for persons who completed secondary school, 0 otherwise, S₃ is equal to 1 for persons who completed at least a university degree, 0 otherwise.

After fitting this extended earning function, the private rate of return to different levels of schooling can be derived from the Psacharopoulos’ formula (Cohn & Addison, 2006; Psacharopoulos, 1982) suggests that the marginal rate of return to schooling (per year of extra study) is given by the following formula:

r higherversussecondary = ( b 3 − b 2 ) / ( n 3 − n 2 ) (3)

where n₂, n₃ are respectively the years 6 and 4 (n₂ = 6 and n₃ = 4) of education associated with the levels of education S₂ and S₃.

The data are from the Household Budget Survey (https://www.statistics.gr/documents/20181/fae98df5-d44a-6a13-a681-75d24561fac4). The HBS survey was conducted by the Hellenic Statistical Authority covering 6196 private households throughout the country. The Household Budget Survey is a national survey collecting information for a representative sample of households, on households’ composition, members’ employment, living conditions and mainly focusing on their members’ expenditure on goods and services as well as on their income. The HBS is the most appropriate source to analyze the changes in the living conditions of the households in comparison with the previous surveys (see: https://www.statistics.gr/el/statistics/-/publication/SFA05/-).

In the following tables, we present the results of the data processed from https://www.statistics.gr/documents/20181/fae98df5-d44a-6a13-a681-75d24561fac4.

According to the results of Table 2, the rate of return is estimated as follows:

r higherversussecondary = ( b 3 − b 2 ) / ( n 3 − n 2 ) = ( 0.584 − 0.239 ) / 4 = 0.345 / 4 = 0.8625

So, the rate of return is 8.63%.

According to the results of Table 3, the rate of return is estimated as follows:

r higherversussecondary = ( b 3 − b 2 ) / ( n 3 − n 2 ) = ( 0. 48 0 − 0. 144 ) / 4 = 0.336 / 4 = 0.084

So, the rate of return is 8.4%.

According to the results of Table 4, the rate of return is estimated as follows:

r higherversussecondary = ( b 3 − b 2 ) / ( n 3 − n 2 ) = ( 0.740 − 0.331 ) / 4 = 0.409 / 4 = 0.10225

Source: ELSTAT (Hellenic Statistical Authority), https://www.statistics.gr/documents/20181/fae98df5-d44a-6a13-a681-75d24561fac4.

Source: ELSTAT (Hellenic Statistical Authority), https://www.statistics.gr/documents/20181/fae98df5-d44a-6a13-a681-75d24561fac4.

Source: ELSTAT (Hellenic Statistical Authority), https://www.statistics.gr/documents/20181/fae98df5-d44a-6a13-a681-75d24561fac4.

So, the rate of return is 10.23%.

According to Table 3 and Table 4, the returns to higher education are higher for women than for men (Montenegro & Patrinos, 2021; Psacharopoulos & Patrinos, 2018) .

There has been a tremendous increase in schooling attainment in recent decades. As schooling in an economy increases, the returns to schooling tend to decrease (Trostel et al., 2002) . The results shown from the above studies specify that the rates of return on higher education fell to the value of 8.63% (overall)—men receive 8.4% returns and women receive 10.23% returns on higher education in Greece. Europe and Central Asia have higher returns at the tertiary level of education (just over 10%). Men receive 10.6% returns and the gap between men and women has increased with women’s returns at 12.4% (Montenegro & Patrinos, 2021, Table 4) . The returns to higher education are higher in high-income economies (Psacharopoulos & Patrinos, 2018, Table 4) . This means that corrective educational reforms need to be made that will further upgrade the quality of the higher education provided in Greece (Magoula & Psacharopoulos, 1999) .

The rising rate of returns on education has been associated with the increase in education funding, it is considered necessary to take them into account when planning further education funding. Undoubtedly, the challenges facing higher education require more governance and funding.

Finally, since the rates of return on higher education are falling, as the demand for additional years of higher education increases, it is deemed necessary to continue the study of the rates of return on education for holders of Master’s and Ph.D. diplomas in Greece.

The author declares no conflicts of interest regarding the publication of this paper.

Magoula, T. (2023). Economic Rates of Return on Higher Education in Greece, 1962-2022. Theoretical Economics Letters, 13, 1757-1764. https://doi.org/10.4236/tel.2023.137101

Source: Magoula (1999b: p. 103, Table 1) and Ministry of Education, Religious Affairs, and Sports: Ministerial Decisions: Φ. 253.1/2000, Φ. 253.1/2005, Φ. 253.1/2010, Φ. 253.1/2015, Φ. 253.1/2020, Φ. 253.1/2021 and Φ. 253.1/2022.